December 03, 2024 | Read Online

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"No Person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State."

— The Constitution of the United States

Crypto's new use case: Making emoluments great again

In 1943, Lyndon Johnson bought the KTBC radio station in Austin, TX, at a fire-sale price of $17,500.

Johnson was the only bidder for KTBC because, as a sitting congressman, he was the only potential buyer who could persuade the Federal Communications Commission to approve the sale — without the FCC's consent, the station was worthless.

With its consent, however, KTBC turned out to be worth quite a lot.

Teetering on the brink of bankruptcy when Johnson bought it, the loss-making radio station increased its revenue tenfold in the first three years under its new owner.

In 1946 alone, KTBC booked $272,500 of revenue, 18x what Johnson paid for it.

That's not because Johnson or the station's nominal owner (Johnson's wife, Lady Bird), knew anything about running a radio station — they didn't.

Instead, it was because Johnson used KTBC as a means to monetize his political power.

In the first volume of his epic biography of LBJ, Robert Caro quotes a Texas businessman who told him that as soon as Johnson bought KTBC, "everybody knew that a good way to get Lyndon to help you with government contracts was to advertise over his radio station."

Caro found that one of KTBC's advertisers subsequently received approval from the Office of Price Administration to sell 150,000 crates of grapefruits — a valuable concession with war-time central planning in effect.

Another advertiser was awarded a lucrative contract to sell power saws to the Army and Navy, as well as a $1.25 million loan from the Reconstruction Finance Corporation to finance the gambit.

"Other businessmen observed the pattern and followed it," Caro writes. "Although they were ostensibly buying airtime, what they were really buying was political influence. They were buying — and Lyndon Jonhson was selling."

When Caro unearthed this arrangement decades after the fact, it was the first known example of a president selling political influence through a privately owned company.

The nearest comparison is perhaps the Trump International Hotel, where allegations of political favors done for hotel patrons were substantial enough to make it all the way to the Supreme Court.

Brought on behalf of nearby hotels that felt they were being competitively disadvantaged, the case alleged that Trump had violated the previously obscure Emoluments Clauses of the Constitution by accepting gifts (in the form of hotel charges) from both foreign and domestic officials that stayed at the hotel.

It was a rare opportunity to find out if the founding fathers intended hotel room charges to be considered Emoluments, but, sadly, we never could because the Supreme Court dropped the case in 2021, declaring the issue "moot" since President Trump was no longer in office.

Thanks to crypto, however, we may soon have another shot at legal enlightenment: Justin Sun's $30 million investment in the Trump-family DeFi project World Liberty Financial seems like an even more direct way to monetize political power via emoluments — perhaps even as direct as LBJ's KTBC arrangement.

As with KTBC, World Liberty Financial is a family business, so President Trump can semi-plausibly deny involvement, just like LBJ did (claiming the business was run entirely by Lady Bird).

Unlike KTBC, however, we won't have to wait decades for a biographer to piece the story together — instead, we can read about it in real-time on X: "We are thrilled to invest $30 million in World Liberty Financial @worldlibertyfi as its largest investor," Justin Sun happily announced last week.

This presents some obvious conflicts of interest.

In addition to being the CEO of three companies currently being sued by the US government, Sun is also a head of state (as prime minister of the uninhabited micronation Liberland) — so his $30 million investment seems like a tailor-made test of the Emoluments Clauses.

There may be others.

Following Sun's investment, the Wall Street Journal quoted a co-founder of World Liberty Financial, Zak Folkman, saying "there have been a number of similarly significant purchases" of World Liberty's WLFI token in the wake of Trump's re-election, and that he expects more such purchases to come.

It's hard to imagine those buyers won't be expecting LBJ-style political favors in return.

Irrespective of whether they get them, the arrangement seems likely to be challenged in court — and if President Trump can plausibly deny involvement in the family DeFi business, crypto may make constitutional history by effectively legalizing emoluments.

Even if he fails to win that argument in court, this week's news suggests there will be a presidential pardon in it for everyone involved (or at least for family members).

But I don't think that's reason to despair about the state of US politics.

Reading Caro's biography of LBJ is a reminder that today's politics are not so uniquely awful — the 1940s FCC, for example, was more political than today's SEC, and also more bureaucratic and slower moving than the agencies now being targeted by Elon Musk's Department of Government Efficiency.

The emoluments were bigger back then, too — but crypto might change that.

— Byron Gilliam

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Rafael @n3ocortex

Stablecoin exchange inflows (#USDT + #USDC) in the past month 👀

5:01 PM • Dec 3, 2024

221 Likes 35 Retweets

6 Replies

Dan Smith @smyyguy

Still plenty of room to run this cycle?

Monetary transaction demand (measured in REV) across all blockchains could be a decent indicator of where we are in the cycle, given it is a measure of how much users are paying to use blockchains

Last cycle, monthly aggregate REV topped… x.com/i/web/status/1…